You Need to Raise Prices but Don't Want to Lose Customers. Here's How.

You know you need to raise your prices. You’ve known for at least a year. The fuel bill keeps coming higher, your material costs are up across the board, your insurance renewal went up, and your best tech is making three dollars an hour more than he was a couple years ago. Meanwhile your prices are the same numbers you set when none of that was true. You also haven’t moved them because every time you think about the conversation, you imagine three or four of your best, longest-running customers going somewhere else, and the math on losing them feels worse than the math on holding the line.

That’s the trap. The longer you sit in it, the worse the problem gets.

What the gap actually looks like

Take a $1.5M trades business running on 22% net profit. That’s about $330,000 a year before the owner is paid. Now run a few things up the way they have actually run up over the last couple of years. Fuel and vehicle costs eating into every service call. Copper, PVC, ductwork, and fittings all coming in higher than they used to. Workers comp premiums climbing at the annual audit. A $25 an hour journeyman a couple years ago is closer to $30 now in most markets. Insurance renewals trending up year after year.

If your costs have crept up ten percent and your prices have held, that $330,000 is now closer to $220,000. A third of your profit is gone, and you can’t quite point to where it went, because it didn’t leave in one big check. It left a few hundred dollars at a time, on every job, for two years.

The money didn’t disappear. It got eaten by the gap.

How much to actually raise

This is where most owners freeze up. They’ve heard advice ranging from “raise prices 10% every year” to “match what the competition charges” to “just do it and see what happens.” None of that is useful when you’re sitting at the kitchen table trying to figure out what to send to your customers next week.

Here is what actually happens at different ranges.

Five to ten percent: most customers won’t blink. This is the range where you might get a grumble or two and lose almost nobody. For an owner who hasn’t raised prices in a couple of years, this is the minimum. If you have not raised prices in three or four years, ten percent does not even close the gap. It just slows the bleeding.

Ten to fifteen percent: you’ll get a couple of conversations. Some customers will ask why. A few might shop you against another contractor. Most will accept the new number, especially if you give them notice and frame it the right way.

The customers you risk losing in this range are mostly the ones you should already be looking to replace. Every trades business has them. The customer who pushes back on every invoice. The customer who shopped you against two other contractors and went with you because you were three hundred dollars cheaper. The customer who calls at four on a Friday and expects you to be there in an hour, and then wants to know why there’s an after-hours charge. These are not your good customers. They are the ones eating your margin and your tech’s patience, and they will leave the moment someone underbids you by another three hundred dollars anyway. A price increase that nudges them out the door is doing your business a favor. The customers worth keeping are the ones who pay on time, refer their neighbors, and understand that good work costs money. Those customers will accept a reasonable increase. The ones who won’t were never going to be loyal in the first place.

Fifteen percent and above in a single move: now you’re in shock territory. This is where you start losing customers who would have stayed for a smaller increase. If the gap between where your prices are and where they should be is this big, you do not want to close it in one move.

Space it out. A twenty-five percent correction in one move reads as desperation. The same twenty-five percent done as ten percent now, another ten percent next year, and a smaller adjustment the year after that reads as normal business. Same destination. Very different customer reaction.

The harder truth is that if you skip annual increases, the correction you eventually have to make compounds. The owners who have the easiest time with pricing are the ones who built a small annual adjustment into the routine, so a four to six percent increase every year became something customers expected rather than something they reacted to. The owners with the hardest time are the ones who waited five years and then needed thirty percent.

The math on a reasonable increase is worth calculating. A $1.5M business raising prices ten percent and keeping ninety percent of its customers gains $135,000 in revenue with essentially no added cost. Almost all of that goes to the bottom line. The customers you “lose” in that scenario are mostly the ones who were already costing you money you did not realize you were losing.

How to make the underlying numbers work

Raising prices is the easier half of the conversation. The harder half is knowing what the new prices actually need to be.

Start with your real cost structure, not what the competition charges. What does a tech actually cost you fully loaded? It is wages plus employer taxes plus workers comp plus benefits. On a $25 an hour wage, the real number is closer to $36. If you have been pricing jobs off the $25 number, your gross margin has been fiction for years.

Decide what net profit you actually need to cover overhead and pay yourself what you want to take home. Net profit is what is left after everything is paid, including a real salary for you. Most trades businesses at this size are running on closer to eight to fifteen percent net profit, and a lot of owners cannot tell you which number is theirs. If you do not know yours, that is the place to start, not the rate sheet.

Charge different rates for different work. Service calls, scheduled maintenance, installs, emergency calls, after-hours. One rate across all of them is a sign that the pricing has not been thought through. Emergency work and after-hours calls should carry a premium that reflects what they actually cost you in overtime wages and disruption to scheduled work. Most owners under-price these because they are priced as a favor to the customer instead of as a service. The favor is costing you money.

Build the rate review into your operation. Pick a month every year, most trades use January or the start of your slow season, and review pricing then. Put it on the calendar. Make it a normal annual operating event, not a reaction to a bad quarter. The owners who do this have an easier time raising prices because the conversation has a structure to it. The owners who do not, end up raising prices only when they are already hurting, which is exactly when customers are most likely to push back.

How to deliver the increase to customers

Give meaningful notice. Thirty days for residential customers, sixty to ninety days for commercial accounts and long-running maintenance contracts. The runway is the difference between an irritated email and a cancelled account.

Frame it as a planned annual adjustment, not a reaction. This is the single biggest difference between increases that go smoothly and ones that do not. “We review our pricing every year, and effective [date] our rates will reflect the following changes” lands very differently than “I have to raise prices because I am struggling.” The first sounds like a business that knows what it is doing. The second sounds like one in trouble.

State the new rate. State the date. A short, clean notification works better than a long explanation. The shorter version reads like a business operating the way a business is supposed to operate.

For your best customers, the accounts you genuinely value, you can offer a phase-in if you want to. Lock the new rate in over two or three months instead of one jump. This is for the ones who have earned it, not for everyone.

If a customer pushes back, a calm and brief response is all that is needed. Most will not push back at all.

The actual words to use matter, so here are three examples you can pull from.

For a residential customer:

Hi [Name], we review our pricing every year to keep up with what it costs to run the business. Effective [date], our service call rate will be [new amount] and our hourly rate for work over the first hour will be [new amount]. Thanks for being a customer of [company name]. Please reach out if you have any questions about an upcoming job.

For a commercial customer or long-running maintenance account:

[Name], I want to give you advance notice of a pricing adjustment that will take effect on [date]. Effective that date, our rate for [scope of work] will be [new amount]. I wanted to get this to you well ahead of the change so you have time to plan around it on your end. I appreciate the work we do together and look forward to continuing it.

For a customer who pushes back directly after receiving the notice:

I understand. Our pricing reflects what it costs us to do the work well. The new rate takes effect [date]. If you would like to schedule any remaining work before then at the current rate, I can do that for you.

What these have in common is that they state the new number and the date. They do not apologize. They do not justify. They do not ask permission. They treat the increase as a normal annual operating event because that is what it is.

Closing

The owners who have the hardest time with pricing are the ones who set their rates once and then waited until the numbers stopped working to look at them again. The owners who have the easiest time are the ones who treat pricing as part of how the business runs, not as a difficult conversation they have to brace for. The gap between those two postures is the difference between an annual adjustment customers expect and a correction that costs you accounts.

If your prices haven’t kept up with your costs and you’re not sure what to do about it, that’s a conversation we can have. Book a discovery call here.